From January 1, the Chancellor is planning to end the duty free allowance on VAT, meaning visitors will have to pay an extra 20 per cent for goods they buy here.
The Government claims the move will help repair the country’s finances by saving £524 million, couching it as closing a tax loophole for the rich in London.
But while London is the main centre for international duty free shopping, Edinburgh and Manchester’s shops also take £92 million and £62 million a year from visitors using the perk.
Rhys Whalley, executive director of the Manchester China Forum, said: “Losing duty free would have major ramification, hitting visitor numbers and damaging hotels, restaurants and tourism.”
He said big retail centres such as the Cheshire Oaks designer outlet village would be especially badly hit.
Industry experts say the tourist tax will make around 1.1 million big spending tourists either cancel UK holidays or cut them short every year. They say that will hit jobs and the economy just as Britain tries to get back on its feet after Covid-19 and Brexit.
Manchester airport in recent years put on direct flights to Beijing and Hong Kong which proved a huge success. But they have been suspended during Covid and the duty free move could mean they are not resumed.
“The Beijing route was forecast to bring in £500 million of new spending in 10 years,” Mr Whalley said. “It hit that target in 24 months. This is really important for our region.”
Edinburgh has also brought in direct flights from China in recent years.
Neil Ellis, of the Edinburgh Hotels Association, said: “The proposals will have an impact on price-sensitive international visitors who come to Scotland to shop, use hospitality services and enjoy our culture and heritage.”
The Scottish Retail Consortium’s director David Lonsdale described it as an “ill-judged decision”. “It is set to cost Edinburgh retailers many millions in lost retail sales, let alone the knock-on impact on tourism.”
Losing duty free shopping would have a major ramification, hitting visitor numbers and tourism
Manchester business chief
Michael Bonsor, managing director of the Rosewood Hotel in Holborn, said the impact on London would be hard, but stressed that his long-haul guests also often visit Edinburgh, the Lake District and the Dorset coast while staying in the UK. “They love to shop for cashmere in Scotland, and for them, the 20 per cent discount is incredibly valuable. Tourists are so drawn to London by that 20 per cent, again and again. Now people who’ve been here a few times before will just go to Paris instead.”
He added: “The Chancellor has gone out of his way to help the hospitality workforce with VAT cuts and Eat Out to Help Out and now he is hitting us like this. It just seems very short sighted and absolutely shocking we are dealing with this on top of everything else.”
A Treasury spokesman said: “Around 92 per cent of visitors to the UK don’t use the VAT Retail Export Scheme and tax-free shopping is still available in store when goods are posted to overseas addresses.”